One thing we could say about the analysts on New Jersey Resources Corporation (NYSE:NJR) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.
After the downgrade, the five analysts covering New Jersey Resources are now predicting revenues of US$2.5b in 2020. If met, this would reflect a decent 14% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to be US$2.08, approximately in line with the last 12 months. Prior to this update, the analysts had been forecasting revenues of US$2.8b and earnings per share (EPS) of US$2.11 in 2020. Indeed we can see that the consensus opinion has undergone some fundamental changes following the recent consensus updates, with a substantial drop in revenues and some minor tweaks to earnings numbers.
The consensus has reconfirmed its price target of US$40.83, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on New Jersey Resources' market value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic New Jersey Resources analyst has a price target of US$53.00 per share, while the most pessimistic values it at US$31.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting New Jersey Resources' growth to accelerate, with the forecast 14% growth ranking favourably alongside historical growth of 1.5% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.8% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that New Jersey Resources is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on New Jersey Resources after today.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with New Jersey Resources' financials, such as concerns around earnings quality. For more information, you can click here to discover this and the 2 other risks we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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